Sustainable Finance is used to support businesses that are making a positive impact to the environment and society with the end goal of reaching net zero
Sustainable finance refers to investment decisions in the financial sector that take into consideration environmental, social and governance factors.
These investments aim to support sustainable economic activities and projects.
Some of these considerations include:
- Climate change mitigation and adaption
- Inequality and inclusiveness
- Management structures
- Pollution prevention
- Labour relations
- Circular economy
Sustainable finance also looks to create transparency when it comes to risks related to ESG factors that may have an impact on the financial system.
It aims to diminish these risks through governing finance and corporate actors.
Inside sustainable finance
Sustainable finance is a net term for several things, including green bonds, social impact investing, ESG focused asset management, sustainable banking and climate finance.
These financial investments are usually designed in order to support projects and businesses that have a positive impact on society and the environment.
Businesses that, for example, would benefit from sustainable finance are based in renewable energy, sustainable agriculture, affordable housing and healthcare.
The aim of sustainable finance is to incentivise sustainable practices with the end goal of a more resilient, inclusive and sustainable economy.
Banks such as HSBC are investing heavily into the sector, with the company outlining its support in its most recent financial report.
Julian Wentzel, Group Sustainability Officer at HSBC, said on Linkedin: “I am pleased to share that we have provided and facilitated US$54.1 billion of sustainable finance and investments in the first half of 2025, as part of our ambition to support customers in their transition to net zero and a sustainable future.”
The core concepts of sustainable finance
Green bonds
Green bonds are funds that are dedicated to green projects that have a beneficial effect on the environment.
Those applying for the bonds will need to prove to the investors its sustainability goals, which will be periodically checked through its use.
Social impact investing
This type of investment focuses on contributing to global societal change, helping to build stronger communities and improve lives.
When looking at investments, investors and providers often refer to the Sustainable Development Goals laid out by the United Nations in 2015 as a guide to whether the project meets criteria.
ESG focused asset management
ESG investing focuses on companies that are having a positive impact on environmental, social and governance principles.
This sector mainly looks at how companies’ management and stakeholders make decisions, rather than focusing solely on how the decisions will impact the world.
These investments often work by scoring and ranking companies on ESG standards and initiatives, and investing where appropriate.
Sustainable banking
Sustainable banking refers to the practice of integrating ESG criteria into decision making processes that are related to finance.
This refers to banks offering incentives to enable people to make eco-friendly choices like green loans, mortgages and climate screened investments.
Climate finance
Climate finance refers to grants, loans and investments dedicated to adapting actions to address climate change.
The financial support is focused on climate policy, capacity building, the transition to renewable energy, carbon offsetting and climate resilient infrastructure.
The benefits of sustainable finance
The European Commission says that sustainable finance plays a key role in delivering on the policy objectives under the European green deal.
The WWF says that it is a key lever to influence sustainable outcomes.
The organisation says that financing sustainable business has broader societal benefits, which is why the practice is gaining traction.
The WWF says these investments will support the shift to a low-carbon economy by identifying sustainable opportunities for finance.
Leading companies in providing sustainable finance
Barclays
Barclays says that it aims to provide green and sustainable finance that is required to transform the economies it serves.
It believes that it plays a crucial role in helping channel investment, including its own capital, into green technologies and low carbon infrastructure projects.
The bank is committed to reaching net zero by 2050 and has a target of US$1tn in sustainable and transition financing.
Daniel Hanna, Barclays Global Head of Sustainable Finance for the Corporate and Investment Bank, said: “Barclays is uniquely positioned to help scale the new climate technologies that will decarbonise industries and create green jobs.
“Many of the technologies that are required to achieve Net Zero have not yet reached commercial scale.
“Barclays can play a critical role though leveraging our experience as an advisor, bank and investor through our Sustainable Impact Capital Programme to help accelerate their development and adoption.“
Santander
Santander says that sustainable finance is key to achieving an economy that is more respectful to people and the planet.
The bank has created the Sustainable Finance and Investment Classification System as a tool to classify its activity as green, social or sustainable.
Most recently, the bank has partnered with Xynteo to deliver the UK’s first zero carbon holistically sustainable buildings.
Fiona Hyde, Head of Sustainable and Responsible Banking at Santander, said: “We are proud and excited to be founding members of Build Ahead UK.
“At Santander, we trust in the power of collaboration to support a secure and inclusive transition to a more sustainable economy.
“We want to help our clients and partners to access the network, information, and tools they need to enable sustainable growth.
“Through Build Ahead UK, we believe we can apply a “test and learn” model, taking action to push for system-wide decarbonisation and to consider demand and finance as a key enabler.”
Source: https://sustainabilitymag.com/
